Case Law Details
DCIT Vs PRL Projects & Infrastructure Lt. (ITAT Delhi)
Regarding the disallowance of Rs. 40,19,608/- u/s 40(a)(ia) of the Act, it has seen that this issue is covered in favour of the assessee by order of ITAT Mumbai Bench in the case of Kotak Securities Limited vs. DCIT (TDS) (supra) wherein the Mumbai Bench of the ITAT has held that there is no principal – agent relationship between the bank issuing the bank guarantee of the assessee. The Mumbai Bench has noted that when the bank issues a bank guarantee on behalf of the assessee, all it does is to accept the commitment of making payment of a specified amount to the beneficiary on demand and it is in consideration of this commitment that the bank charges of fee which is termed as ‘bank guarantee commission’. The ITAT Mumbai Bench has further noted that while it is termed as ‘guarantee commission’, the same is not in the nature of commission as it is understood in common business parlance and in context of section 194H. The ITAT Mumbai Bench went to hold that no TDS was deductible on such bank guarantee commission.
If there is no exempt income, no disallowance u/s 14A can be made
Regarding the disallowance of Rs. 1,32,540/- u/s 14A, it is undisputed that the assessee had not earned any exempt income during the year and as such no expenditure could be said to have been incurred to earn the exempt income. It is settled law that if there is no exempt income, no disallowance u/s 14A can be made.
FULL TEXT OF THE ITAT JUDGMENT
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